The European Commission wants to concentrate development aid on fewer recipient countries and to attach more conditions to the aid under an Agenda for Change adopted today (13 October).  The EU provided just over €11 billion in foreign aid last year.

The Agenda has been drafted by Andris Piebalgs, the European commissioner for development.

One of the most important innovations is the notion of “differentiated partnership”, under which countries will be eligible for a particular mix of interventions – from grants and budget support to loans and project funding – depending on administrative capacity and their will to reform.

Good governance

The focus on good governance creates stricter conditions for aid than the current approach, and could lead to a decrease in funding channelled through governments in non-democratic countries. This is especially relevant in the case of budget support, the Commission’s preferred method of delivering aid, whereby funding flows directly to a country’s treasury. Critics, including MEPs and member states, have complained that budget support is given without sufficient safeguards and little reference to a recipient government’s policies or democratic credentials. This year’s uprisings in north Africa increased complaints that the EU’s budget support had been propping up undemocratic regimes.

According to the Agenda, the EU’s development policy must focus on “inclusive” growth – economic development that reaches the poorest in a given country. Piebalgs emphasised the importance of economic growth from the start of his term as commissioner for development, which began early in 2010, but has since shifted language to stress that such growth must trickle down to those most in need. This has implications for the EU’s approach to middle-income countries such as Brazil or India, that have seen their gross domestic product grow steeply, but where growth has often exacerbated social inequalities or simply bypassed segments of the population – especially the rural poor.

Inclusive growth

Focusing on “inclusive” growth could run counter to another goal of EU development policy that is only alluded to in the Agenda – the reduction in the number of countries receiving assistance, primarily among middle-income economies. A draft of the new strategy seen by European Voice does not spell out its implications as to how many countries will be eligible for some form of EU development aid. But it does propose to focus aid on “the countries most in need and where the EU can have a real impact”, which suggests a reduction. Officials said that Piebalgs is seeking to cut the number of countries receiving EU development aid from around 150. This could apply to several dozen current recipients.

Fact File

Budget support

The Commission’s Agenda for Change is accomp-anied by a paper on budget support, which draws out some of the implications of the Agenda’s push for stricter conditions. Budget support – aid that goes directly to recipients’ treasuries – is the EU’s preferr-ed mode of delivering development assistance.

If stricter conditions are to have an impact on recipient governments, donors have to ensure that they pursue the same goals and share their assessment of the situation in a given country. Member states that are keen on using less direct budget support – for example, the Netherlands – have made it clear that they want the more critical view of budget support to a particular government to prevail in cases where member states differ in their assessment. The Netherlands has also been the most outspoken member state in seeking to link development aid to other foreign policy goals, such as human rights, or co-operation in prosecuting pirates.

Funding for the next MFF

The new development policy is intended to strengthen the Commission’s position on development aid as it prepares for negotiations on the EU’s next multiannual financial framework (MFF), from 2014. The Commission has proposed a funding increase for development in the next MFF. The budget for the development co-operation instrument (DCI), managed by the European Commission, is to rise from €17.3 billion to €20.6bn. The European Development Fund (EDF), which provides aid to countries in Africa, the Caribbean and the Pacific, and is controlled by the member states and hence falls outside the MFF, is set to increase from €22.3bn over the current six-year period to €30.3bn for the seven years from 2014. This is supposed to help member states, and the EU collectively, reach their target of spending 0.7% of gross national income on development.

Joint programming

The member states are expected to view most elements of the Agenda for Change as fairly unproblematic, although resistance might grow once they are translated into actual policy. But one issue raised in the agenda – joint programming – is likely to get a cool reception from some member states.

The draft seen by European Voice announces that the EU will take a “more active leadership role” in co-ordinating and harmonising donor activities. Some member states are bound to see this as a bid by the Commission to have a bigger say over national development aid, and over aid channelled through the European Development Fund, which is controlled by the member states. But the Agenda goes beyond mere co-ordination, proposing that the EU, together with the member states, should develop a single programming document for each recipient country, laying down a division of labour and financial allocations to guide member states’ aid as well. This could, if implemented, reduce member states’ ability to pursue their own goals with their national development aid.

The Agenda acknowledges that the new approach may, for some countries, “result in less or no EU development grant aid”. Instead it wants to lead them into a “different development relationship based on loans, technical co-operation or support for trilateral co-operation” and stronger private-sector involvement. France and Germany are the two member states pushing most strongly for this blending of grants and loans.

But Nicolas Mombrial, a spokesperson for Oxfam International, an aid agency, said that no proper analysis of the expected impact on the poorest of this move towards investing more aid in the private sector had been undertaken. He said that the shift was “worrying in a context where official development aid is unlikely to increase in the next year”. Increasing the impact of EU development funding is a core demand by member states at a time of tight budgetary constraints.

Despite its title, the Agenda for Change stresses that it does not seek to “rewrite basic policy principles”. It adds: “There will be no weakening of the EU’s overarching objective of poverty elimination,” and the EU will remain “firm” on its financing commitments, achievement of the Millennium Development Goals (MDGs) and aid effectiveness.